Firm Types and Managerial Capital: Findings from Private Bond Contracts

Field experiments have variously discovered that modern management practices can enhance productivity, but not all firms adopt such practices. In this study, we examine private bond contracts used by the Public House operators to explore if such variations are due to differences in the types of the firms. Asset-backed bonds entail operating covenants restricting management actions in areas such as acquisitions and disposals. We find that managed firms that provide greater flexibility in managing their operations are more responsive to these covenants then the tenanted firms. We also show that middle-level management practices are strongly associated with improved establishment performance.